August 21, 2014 | By Barbara Vergetis Lundin

The United States has reduced its biofuels target for 2014 from 18.2 billion to 15.2 billion gallons, while the European Union has lowered its ceiling on food-based biofuels used in the transportation fuel mix from 10 percent to 7 percent -- both moves that slow the urgency around the industry's growth and biofuels' role in wider renewable targets, according to research and consulting firm GlobalData.

The U.S. Environmental Protection Agency (EPA) has shaved 3 billion gallons from this year's biofuels goal, according to a GlobalData report, marking the first reduction to annual targets since they were set in 2007, with future reductions and regulatory modifications likely.

"While gasoline demand has declined over the past seven years, the approved annual use of ethanol in gasoline has not been adjusted to reflect this change, as increasing amounts of biofuels have been mandated to be blended into petroleum products each year through to 2020," said Carmine Rositano, GlobalData's managing analyst for downstream oil and gas. "The refining industry has warned that increasing ethanol use in gasoline will exceed the 10 percent mix that dominates car engine designs and the gasoline fuelling infrastructure, so revising the mandated amounts for biofuels in the energy mix today makes economic sense."

While U.S. biofuels targets have been cut to mirror the decrease in gasoline demand, the E.U. has a different reason for its own target adjustments.

"The E.U.'s new 7 percent biofuels ceiling comes in response to claims that using biofuels made from food crops increases inflation on food costs," Rositano explained. "As the EU is still aiming to achieve 10 percent of transportation fuels made from renewable energy sources by 2020, the gap between this target and the 7 percent ceiling of food-based biofuels indicates a reliance on next generation biofuels made from algae, waste and other materials."

Matthew Jurecky, GlobalData's head of oil and gas research added that it is normal for agencies to review challenged policy and ongoing analysis on the actual reduction of greenhouse gases and includes the entire value chain, prices, and the impact on food crops, and simple economics associated with producing biofuels underlie the regulatory shift.

"Biofuels will remain a part of meeting mandated renewable energy and emissions targets, but other industries and policies, such as more stringent efficiency standards, also play a role," Jurecky said.

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